529 college plans benefits for families
Most options offer many choices, built mainly around mutual funds
about income limits? There aren’t any. Plus, most plans don’t restrict how much you invest, and there are no general age requirements for getting started, though an earlier start would give your account more time to grow.
Starting in 2024, these 529 plans gained another benefit that should boost their popularity. Now, at least some money not used for college can be rolled into a Roth IRA, tax and penaltyfree, and used for retirement.
Account owners (the parents or others who set up and contributed money) can move 529 money into a Roth on behalf of the adult-child beneficiary, in his or her name. Up to $7,000 can be transferred annually ($8,000 for recipients 50 and older), up to a lifetime maximum of $35,000.
Not recognizing how financial aid factors in
If your child is exceptionally gifted or a standout athlete, a scholarship might carry him or her through college, but only about 0.3% of students earn a free ride.
“Most kids who apply for financial aid get it, but the dollar amounts aren’t high,” said Tricia Scarlata, head of education savings at J.P. Morgan Asset Management.
One relatively new change means that for financial aid under the Free Application for Federal Student Aid, the calculations no longer consider a family’s entire assets, which can make it easier to qualify, Scarlata said.
Assets held in a student’s name count most heavily, which makes financial aid harder to receive, but parental assets including 529 balances for dependent children count less while 529 balances and other money in the name of a grandparent don’t count at all.
FAFSA calculations also consider income levels, counting the student’s income most highly.
Average 529 account balances aren’t exceptionally high − about $28,000 according to a mid-2023 tally by the College Savings Plans Network, which suggests most families will need to pursue a multipronged strategy anyway.